Amid crypto meltdown, Tether reduces corporate debts in USDT reserves

abdelaziz Fathi

Tether, which is closely affiliated with crypto exchange Bitfinex, has drastically reduced its holdings of commercial debt in its reserves over the last six months. Instead, the stablecoin issuer allocated most of its non-fiat reserves to Treasury bills, almost doubling assets in short-term government securities.

Tether

Tether’s chief technology officer Paolo Ardoino said in a Twitter Spaces chat that the issuer of the world’s most-used stablecoin now holds the majority of its reserves in US Treasuries.

As the company continues to face questions about what its USDT token is actually backed by, Tether has been reducing the amount of corporate debts in its reserves. In the September-December quarter, commercial papers made up nearly a third of Tether’s total holdings compared to 44% in the previous quarter.

In absolute terms, the value of these instruments dropped by more than $6 billion, from $30 billion in Q3 to $24 billion in December. Additionally, Tether reduced its cash assets, from $7.2 billion to $4.2 billion.

As part of its settlement with US regulators last year, Tether is required to release quarterly attestations of its assets and liabilities in order to be more transparent with its token holders over what exactly backs its stablecoin.

Has Anyone Seen Tether’s Billions?

The new disclosure comes as the meltdown in other stablecoins rippled through cryptocurrency markets and pushed USDT itself below its dollar peg. Tether’s coin dropped to as low as 95 US cents yesterday, but then recouped losses and was last traded at 99 US cents, according to CoinMarketCap.

In October 2021, Bloomberg ran an article titled “Anyone Seen Tether’s Billions?” claiming that Tether invested billions of dollars in short-term loans in large Chinese companies – including Evergrande, which is facing one of the world’s largest-ever defaults.

Tether issued a response to the surfaced report on the company’s website. It denied the findings of Bloomberg’s paper, even accusing the author and its sources of unethical motivations.

Tether — which claims to back its tokens 1-to-1 with the US dollar to ensure stability in value — said the reporter relied on John Betts, the former head of Noble Bank, whom Tether fired as its banker. The company added that it’s already suing Betts for engaging in “egregious and wasteful self-dealing and seeking to enrich himself at Noble’s expense.”

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